Indirect tax

Indirect Tax Alerts & Briefing Papers

Case Alert: Ryanair Ltd - Court of Justice Judgment [ 206 kb ]

The Court of Justice has delivered its judgment in this Irish referral. The issue was whether Ryanair was entitled to reclaim input tax incurred on costs relating to the proposed takeover of Aer Lingus. The takeover was aborted after the European Commission blocked it on competition grounds. The Irish Revenue considered that Ryanair was not entitled to the claim on the basis that it had not made any taxable supplies of management services to Aer Lingus. However, the Court ruled in Ryanair's favour.

VAT Alert: Quick Fixes approved by European Council [ 295 kb ]

The European Council has approved plans put forward by the European Commission to apply a number of quick fixes to the EU VAT system. The measures - which come into force on 1 January 2020 - affect the VAT treatment of 'call off' stock sent to other Member States, provide for the simplification of chain transactions and make it compulsory to obtain and verify a customer's VAT identification number on intra-Community supplies of goods as a condition of securing exemption from VAT. Our VAT Alert covers these in more detail.

Making Tax Digital - Slides from recent MTD Workshop [ 3460 kb ]

Our Workshop on 21 September was well attended but, inevitably, some delegates could not make it on the day.  Our slides for the event can be found by clicking on the above link. Anyone wishing to see a demonstration of Grant Thornton's API Submission tool or wishing to discuss their particular MTD requirements, contact your usual Grant Thornton advisor.

Making Tax Digital - Grant Thornton's API submission tool [ 147 kb ]

Grant Thornton has designed an API software solution to help businesses to submit their VAT returns digitally when Making Tax Digital for VAT is introduced in April 2019. For a demonstration, contact you local Grant Thornton VAT specialist or any of the VAT team listed in the Briefing Paper accessed from this link.

VAT Alert - new legislation on VAT & Vouchers [ 205 kb ]

The Finance Bill 2018/19 includes measures to change the VAT accounting treatment of vouchers. The changes are likely to impact voucher businesses and those involved along the supply chain. Businesses selling vouchers may need to register for VAT in other Member States of the EU if the underlying redemption goods are physically located there.

Case Alert - DPAS Ltd [ 289 kb ]

The Court of Justice has ruled that the dental plan service provided by DPAS was not transactions involving payments or transfer and not exempt from VAT. The service provided by DPAS was an administrative service which did not alter the legal and financial relationship between the payer and the payee.

Briefing Paper - Making Tax Digital update [ 273 kb ]

HMRC has published its updated Public Notice on MTD which provides greater clarification on the requirements for businesses to adapt their accounting systems. Our Briefing Paper has been updated top reflect these changes.

Talkbook - A Guide to Authorised Economic Operator (AEO) - 'Trusted Trader' status [ 2044 kb ]

Our guide to AEO for businesses that trade goods across international boundaries. Businesses preparing for life after 'Brexit' may benefit form attaining AEO status. Our guide sets out the details

Case Alert - Marle Participations SARL [ 211 kb ]

Court of Justice - Judgment 5 July 2018

Another case relating to the recovery of VAT on acquisition costs by a holding company. This time the Court of Justice has ruled that the letting of a property to a subsidiary is to be regarded as "an involvement in the management of the subsidiary" and thus an economic activity giving the holding company a right of recovery.

Article on Making Tax Digital - Tax Journal [ 92 kb ]

This article - written by Olga Bondar of our Indirect Tax team in London highlights the issues facing all VAT registered businesses in relation to the implementation of Making Tax Digital in April 2019. The Article considers what businesses should be doing now to prepare for this huge change to the VAT reporting system in the UK. 

Case Alert - HMRC v Summit Electrical Installations Ltd [ 203 kb ]

Upper Tribunal

This was HMRC's appeal. The First-tier Tax Tribunal allowed Summit's appeal relating to whether a planning restriction contained in the planning consent for a new student accommodation block meant that the building did not meet the statutory definition of a dwelling or number of dwellings. The Upper Tribunal agreed with the FTT and dismissed HMRC's appeal

Case Alert - Marks & Spencer PLC [ 207 kb ]

First-tier Tax Tribunal

This case concerned the promotional offer "Dine In for £10 with free wine" from M&S. The question was whether the supply of the wine as part of the offer was really free. The Tribunal concluded that the economic reality was that the four items (including the food and the wine) were all purchased together as a package for £10 and that, accordingly, the wine was not free and VAT was due on the applicable element of the consideration.

Case Alert - Ryanair Ltd [ 288 kb ]

Court of Justice - Advocate General's Opinion

This case concerns the recovery of input tax on services supplied to Ryanair in relation to an aborted takeover bid for Aer Lingus. The AG confirms that as the acquisition would have expanded the taxpayer's taxable airline activities (taxable outputs) it was entitled to reclaim the input tax on the costs even though the deal was aborted.

Case Alert - Wakefield College [ 209 kb ]

Court of Appeal

This judgment confirms that partial fees paid by students based on their socio economic status is to be regarded as consideration for supplies of education to them by the College and that, as a consequence, the income is to be regarded as 'remuneration' for VAT purposes. The College is 'in business' and the construction of a new teaching block did not qualify for zero-rating

Case Alert - Volkswagen Financial Services UK Ltd [ 203 kb ]

Court of Justice - Advocate General's Opinion

The AG has issued his opinion in the case that began as an input tax issue but has now morphed into a single v multiple supply issue.  The AG considers that when a car is sold on HP terms, there is a single complex supply of a car with finance and that the whole supply is taxable at the standard rate rather than two separate supplies of the car and the credit.

VAT Analytical & Recovery Review [ 207 kb ]

Could your business benefit from a VAT Analytical & Recovery Review?

Case Alert - Marriott Rewards / Whitbread PLC v HMRC [ 206 kb ]

Upper Tribunal

This case concerns the operation of a customer loyalty scheme and whether payments made to hotels constituted third party consideration for the supply of accommodation to customers redeeming previously earned loyalty points. The Tribunal found that the payments were not third party consideration but was direct consideration for a supply of redemption services by the hotel to the operator of the scheme.

VAT Alert - HMRC publishes new policy on cost sharing groups [ 201 kb ]

HMRC has announced a change of policy in relation to the UK's operation of cost sharing groups. This follows a number of recent judgments from the Court of Justice (in particular DNB Banka and Aviva - see below) which ruled that CSG's are not available to businesses in the banking and insurance sectors.

Case Alert - HMRC v University of Cambridge [ 291 kb ]

Court of Appeal

The Court of Appeal has decided to refer this matter to the Court of Justice as it considers that it requires guidance on the interpretation of EU law.  The issue to be resolved is whether the University is entitled to attribute input VAT incurred on fund management fees to its overall general business activities. It considers that the VAT is 'residual input tax' that can be apportioned.  HMRC considers that the input VAT is consumed by the Endowment fund under management and that, as a result, there is no direct or immediate link to the University's general activities.  The First-tier Tax and Upper Tribunals both ruled in  favour of the University and this is HMRC's appeal to the Court of Appeal.

Case Alert - DPAS Ltd [ 290 kb ]

Advocate General's Opinion

The Advocate General considers that direct debit collection services provided by the taxpayer to customers are not 'transactions concerning payments or transfers' and cannot therefore be exempt from VAT under the provisions of Article 135(1)(d) of the VAT Directive.  The services are preliminary services that are liable to VAT at the standard rate.

Brexit Alert [ 209 kb ]

UK and EU publish agreement on VAT & Customs deal

The United Kingdom and the European Union have published a draft agreement setting many of the issues affecting the UK as it prepares t exit from the Union. The agreement includes issues relating to VAT & Customs and introduces a transitional period up to 31 December 2020. Existing VAT & Customs rules will continue in force until that date.

Case Alert - Kreuzmayr GmbH [ 287 kb ]

Court of Justice

This case concerned two separate supplies of fuel and the question of which supply should be regarded for VAT purposes as an Intra Community supply of goods.  The case also concerned whether incorrectly charged VAT can be reclaimed by a businesses through its VAT return. - Held - the only supply that could be regarded as an intra-community supply of goods is the supply to which the transport element could be ascribed. Moreover, VAT incorrectly charged by a supplier cannot be reclaimed by the purchaser through its VAT return.

Case Alert - Boehringer Ingleheim Pharma [ 287 kb ]

Court of Justice

This case concerned the EU principle of equal treatment. The company sold pharmaceutical products to Pharmacies via Wholesalers. They were obliged to pay rebates to insurers under both public and private health insurance schemes.  For public health insurance schemes the taxpayer was allowed to reduce the value of the supply of the goods by the discount given but was not allowed to do so in relation to private health scheme supplies.

VAT Alert - VAT & Pension Schemes - Again ! [ 284 kb ]

HMRC has published new internal guidance for their officers relating to the recovery of VAT by pension schemes. 

Briefing Paper - Making Tax Digital [ 301 kb ]

The Government has decided that Making Tax Digital (“MTD”) is going ahead but that the starting point will be VAT registered taxpayers, rather than those in the Income Tax Self-Assessment (“ITSA”) space. From periods beginning on or after 1 April 2019, VAT registered businesses with a turnover above the VAT registration threshold will be required to submit the current nine box VAT return either straight from the accounting software, or via Application Program Interface (“API”) software linking spreadsheets to the HMRC system. 

Customs Briefing Papers

Briefing Paper - Inward Processing [ 160 kb ]

Briefing Paper - Outward Processing [ 137 kb ]

Briefing Paper - End Use [ 128 kb ]

Briefing Paper - Customs Warehousing [ 159 kb ]

Briefing Paper - Transit [ 120 kb ]

Briefing Paper - Customs compliance [ 146 kb ]

Briefing Paper - Tariff Classification [ 149 kb ]

Briefing Paper - Customs Valuation [ 163 kb ]

Case Alert - Littlewoods Ltd & Ors v HMRC [ 943 kb ]

Supreme Court

The Supreme Court has delivered its judgment in this case which concerns whether interest is payable on a compound basis rather than on a simple basis.  Littlewoods claimed for the repayment of interest which would compensate it for the loss of money over a period going back to 1973. Its claim was in the law of unjust enrichment - a common-law remedy being restitution. HMRC contended that the only regime that was capable of paying interest to taxpayers was that provided under statute. (s78 of the VAT Act 1994). The Supreme Court agrees with that view.  It also considers that the term 'adequate indemnity' as postulated by the Court of Justice does not mean that taxpayers should receive full redress. Member states are entitled to define what provides and adequate indemnity and, in the circumstances, the UK had decided that this was the payment of simple interest as provided for by section 78.

Case Alert - Mercedes-Benz Financial Services UK Ltd [ 945 kb ]

Court of Justice Judgment

The Court of Justice has confirmed that where a leasing contract for a vehicle provides for an 'option to purchase' on payment of a balloon payment, it is to be treated as a supply of services rather than as a supply of goods.  From a tax-point perspective this is good news as leasing companies can account for VAT on receipt of each payment rather than on the full selling price of the vehicle at the commencement of the contract.

VAT Alert - HMRC changes policy on pension schemes managed by insurance companies [ 950 kb ]

HMRC has issued Revenue & Customs Brief 3/2017 highlighting a change of policy in relation to the VAT liability of fund management services provided by Insurance businesses to Defined Benefit pension schemes. A major change acknowledging that the previous exemption applied to insurance companies' fund management services was incorrect.

Briefing Paper - European Commission announces fundamental further changes to the EU VAT system [ 268 kb ]

The EU Commission has announced that it is to introduce new legislation to move the EU VAT system from the current transitional rules to the definitive VAT system by 2019. This new system will tax supplies in the country of destination if the customer is a certified taxable person.

Brexit Indirect Tax Impact Analysis [ 294 kb ]

The UKs departure from the European Union is likely to increase the costs of trading internationally – but by how much? While we may not have sight of what our future relationship with the EU will look like, Grant Thornton has developed Brexit Indirect Tax Impact Analysis, to help you to understand the possible Customs Duty and VAT costs posed to your business by various Brexit scenarios.

Case Alert - Brabners LLP [ 945 kb ]

First-tier Tax Tribunal

This case concerns whether search fees incurred by a firm of conveyancing solicitors which are recharged by the solicitors to its clients are outside the scope of VAT (as disbursements) or are part and parcel of the solicitor's conveyancing service. The Tribunal considered that, on the evidence, the firm was the consumer of the searches (not the client). As such, the recharges were simply further consideration for the supply of the conveyancing service and were subject to VAT. 

Briefing Paper - Customs / AEO in Aviation [ 148 kb ]

The United Kingdom’s Aircraft, Engine and Parts Manufacturing industry is only exceeded in size by that of the United States of America. This is according to IBISWorld’s industry research, which expects overall revenues to rise at a compound annual rate of 4.4% to £30 billion over the five years ending 2017-18. The aviation sector plays an important role in the European economy – a fact recognised by EU Customs authorities. The 2016 Union Customs Code (UCC), provides for Customs Procedures and provisions that offer relief of customs duty liabilities for imported aircraft and parts. The UCC, however puts a sharp focus on ensuring strict compliance with the terms of these Reliefs. Our Briefing Paper offers a guide.

 

Case Alert - Idebrola [ 952 kb ]

Court of Justice Judgment

The Court has overruled the Advocate General (AG) in this case which concerned whether the taxpayer was entitled to reclaim input VAT incurred on the refurbishment of a water pumping station owned by the local Municipality. The AG was of the view that the input VAT could not be reclaimed as the taxpayer had provided its services to the Municipality for no consideration.  The full Court disagreed and said that, to the extent that the works to the pumping station were necessary for it to make its own taxable supplies, the taxpayer was entitled to reclaim the input tax.

Case Alert - DNB Banka / Aviva [ 919 kb ]

Court of Justice Judgment

The Court of Justice has stated that businesses such as DNB Banka and Aviva (which supply financial services) are not entitled to benefit from the exemption for services provided to them by a cost sharing group. The Court has confirmed that the exemption for cost sharing group services is only available to entities that make exempt supplies under the provisions of article 132 of the VAT Directive (known as 'public interest' activities). Financial services are exempt under Article 135 of the VAT Directive so services provided by a cost sharing group cannot be VAT exempt.  This is a blow to the FS (and other non-public interest) sectors. 

Case Alert - SAE Education Ltd [ 947 kb ]

Court of Appeal

This was an appeal by the taxpayer to the Court of Appeal from a decision of the Upper Tribunal.  SAE Education Ltd argued that it should be regarded for VAT purposes as a college of Middlesex University and that, as such, it was an eligible body and could exempt it supplies of education to students.  On the evidence, the Court found that the link between SAE and the university was too tenuous and was more of a commercial or contractual arrangement. SAE was not part of the institution of the university and was not recognised as such by the university.  The Court of Appeal dismissed the taxpayer's appeal.

Case Alert - Summitt Electrical Installations Ltd [ 942 kb ]

First-tier Tax Tribunal

The First-tier Tax Tribunal has issued a decision ruling that a sub-contractor can zero-rate its supplies in a situation where the main contractor has received a certificate from the intended user stating that the building is intended for use as a relevant residential building.  This was because the development also qualified as a dwelling (or number of dwellings).

Case Alert - Languard New Homes Ltd [ 946 kb ]

Upper Tribunal

In this case, a developer converted a public house into four maisonettes. The conversion involved the incorporation of the ground floor (which previously was non-residential) and the 1st floor (which previously was residential) into a single dwelling. The Upper Tribunal ruled that, in such circumstances, the conversion works did not qualify for zero-rating. In addition, neither did the first supply of a major interest by the developer.

VAT Alert - Distance Selling [ 943 kb ]

HMRC revises policy on distance selling

HMRC has updated its policy in relation to the place of supply of distance sales. The new policy reflects the EU VAT Committee's interpretation in relation to the question of whether the supplier 'intervenes' in the delivery service. Where the supplier 'intervenes', the place of supply will be the customers country and VAT will be due in that Member State.

VAT Alert - Care Homes [ 944 kb ]

HMRC revises policy on the construction of care homes

HMRC has revised its policy on the construction of new care homes.  Previously, if there was any element of medical care provided at a home HMRC would class the building as a hospital (the construction of which is standard rated). The new policy accepts a ruling of the First-tier Tax Tribunal in the Pennine Care NHS Trust case that what matters is whether the building provides a residence for the patient not whether he receives care over and above personal care.

Case Alert - London Borough of Ealing [ 948 kb ]

Court of Justice - Judgment

The Court of Justice has ruled that the UK's imposition of a 'distortion of competition' condition on the supply of sports services by public bodies without also imposing the condition on non-public bodies is contrary to EU law. The London Borough of Ealing's provision of sports services should, therefore, have been exempt from VAT.

Case Alert - Mercedes Benz Financial Services Ltd (MBFS) [ 945 kb ]

Court of Justice - Advocate General's opinion

The Advocate General has hinted that, in his view, MBFS's 'Agility' leasing contract - where the customer has an option (but not an obligation) to purchase the vehicle at the end of the lease - constitutes a supply of services for VAT purposes.  If the full Court agrees, this will be a major judgment for the Automotive sector as there will be a substantial claim for a VAT refund. Finance companies have, historically, treated such supplies as supplies of goods paying VAT on the full value of the supply at the 'front end'. Treatment as a supply of services will mean that VAT is only due when each monthly payment is received from the customer.

Case Alert - Iberdrola [ 947 kb ]

Court of Justice - Advocate General's opinion

The issue in this case was whether a developer could reclaim input VAT incurred on the cost of renovating and upgrading a water pumping station which was owned by the local municipality. The company had agreed to do the work as a condition of obtaining planning permission for the development of a holiday park which was to connect to the pumping station.  The AG considers that the company is not entitled to reclaim the input VAT on the basis that there was no sufficient link between the input and its taxable outputs. The direct link was with the free supply of services made to the Municipality.

Case Alert - Brockenhurst College [ 947 kb ]

Court of Justice - Judgment

The question here is whether supplies of catering and entertainment services (concerts and theatrical performances) supplied to fee paying customers were supplies that could be regarded as 'closely related' to the supply of education provided to the college's students. The Advocate General opined that they should not be so regarded but, surprisingly the full court has overturned that opinion. Provided certain conditions are met, the supplies made to third parties may be regarded as 'closely related' to the principal supply of education made to the students and is exempt from VAT.

Case Alert - HMRC v Investment Trust Companies [ 942 kb ]

Supreme Court

A unanimous judgment from the UK's highest court. The Investment Trust Companies had lodged a claim against HMRC for repayment of VAT wrongly paid to fund managers on fund management fees. The claim was for unjust enrichment and the remedy sought was restitution. The Court held that ITC's were not entitled to make their claim as they had no direct relationship with HMRC. The payment of VAT was to the fund managers and any remedy was therefore in the law of contract.

Case Alert - HMRC v VWFS [ 946 kb ]

Supreme Court

The Supreme Court decides to refer the substantive matter to the Court of Justice of the European Union for a preliminary hearing before it decides whether VAT incurred on overheads should be attributed wholly to the supply of finance (as contended for by HMRC) or whether the input VAT on overheads should be apportioned between the appellant's taxable and exempt supplies.

VAT Alert - Bad Debt Relief [ 943 kb ]

Revenue & Customs Brief 01/2017

HMRC finally accepts that businesses are entitled to make claims for bad debts suffered during a period when it imposed unlawful conditions relating to insolvency of the debtor and the passing of title in goods.

U-Drive Ltd [ 947 kb ]

Upper Tribunal

The Upper Tribunal dismisses U-Drive Ltd's appeal from the FTT.  U-Drive was not entitled to reclaim VAT incurred on the cost of repairs to third party car owner's vehicles.  On the facts, there was no written contract and the economic reality was that the repairers did not supply their repair services to U-Drive but to the car owner.  As such, there was no supply to U-Drive and no entitlement to reclaim input VAT

Case Alert - Adecco UK Ltd & Ors [ 944 kb ]

Upper Tribunal

The question here was whether Adecco UK Ltd supplied introductory services when it supplied temporary workers to its clients. Adecco argued that it should only be liable to account for UK VAT on the commission it receives from its customers. HMRC took the view that VAT was due on the full consideration received from the customer which included the temporary worker's employment costs in addition to the commission payable to Adecco. The Tribunal agreed with the First-tier Tribunal that there was a supply of the worker and that VAT was due on the full consideration.

Case Alert - Compass Contract Services Ltd [ 943 kb ]

Court of Justice - Advocate General's Opinion

This is a UK referral to the CJEU. The issue is whether the UK's application of different starting dates for the three year cap in relation to output tax and input tax claims is contrary to the principle of equal treatment.